Thank you very much for attending today's presentation. I am Yoshiyuki Tanabe, President and CEO of Nippon Building Funds Management. I will now go over NBF's results for the first half of 2019, which was our 36th fiscal period. I will make my presentation using the handout material. From a fair disclosure perspective, this presentation material has been released on TD-NET as well as on NBF's website at 10 a.m. today, Tokyo Time.

Please turn to Page 3 of the presentation, where we show the financial highlights. The average occupancy rate during the period stayed at 99.5% following the previous period, and our portfolio remained almost full. In the previous results announcement, I mentioned the extremely low office vacancy rate in Central Tokyo as of the end of January. The most recent figure for July end went even lower to 1.71%. Meanwhile, market rents have gone up by more than 3% from the previous results announcement 6 months ago.

On top of internal growth, such as positive rent revisions based on the low vacancy rate, there was contribution from G-BASE TAMACHI and Osaki Bright Core, which we acquired this spring, combined with the continued reduction of our interest expenses through refinancing, our performance and results were robust as in the first half of the year. As a result, our distribution per unit was JPY 10,560, up JPY 277 or 2.7% period-on-period.

We anticipate some ups and downs in our DPU in the second half of 2019 as well as in the first half of 2020. This is due to the temporary revenue fluctuation in this period and the next from the replacement of a major tenant in the NBF Shinagawa Tower, for which we explained the initiatives we are making in the previous results announcement. However, we expect our DPU to remain at above JPY 10,000. And for your information, we have already secured the next tenants that will move in to the NBF Shinagawa Tower.

Please turn to Page 5. The bar charts show the trend for the past 3 years of our DPU and NAV per unit, which we regard as important metrics in improving unitholder value. As you can see, both have been increasing steadily.

Now on Page 6 onwards, I will go over the financial results. On Page 6, we have a table outlining the properties acquired and disposed as well as our existing properties. Please take a look later.

On Page 7 is our statement of income. Please see the column highlighted in red, which represents the results for the first half of 2019. Operating revenues was JPY 38.53 billion, up JPY 1.06 billion period-on-period. Operating income was JPY 16.73 billion, up JPY 699 million period-on-period. Net nonoperating income and expenses also improved by JPY 171 million period-on-period. And our net income was JPY 15.39 billion, up JPY 871 million period-on-period. We have added the capital gain from the disposal of properties to the reserve for advanced depreciation, leading to total distribution of JPY 14.91 billion. As a result, our DPU is JPY 10,560, up JPY 277 or 2.7% period-on-period.

Now on the right-hand side, I will explain the summary of period-on-period change. First, the breakdown of the JPY 1.06 billion growth in operating revenues. Rental revenues increased JPY 394 million. Other revenues related to property leasing increased JPY 187 million. Gains on sales of investment properties increased JPY 478 million through the disposals of properties.

As for the breakdown of the JPY 394 million increase in rental revenues, JPY 236 million was revenue growth from existing properties. This was mainly due to upward rent revisions as well as progress made in tenant replacements. There was also a net positive effect of JPY 159 million from the property replacements with 3 acquisitions and 2 disposals in this period. The increase in other revenues related to property leasing was mainly due to one-off items, including seasonal factors, such as air-conditioning expenses and the termination penalty from the tenant replacement in the NBF Shinagawa Tower.

Operating profit increased JPY 699 million. This can be broken down to JPY 192 million from existing properties, JPY 100 million net positive impact from property replacements as well as the capital gain from property disposals.

The improvement in nonoperating income and expenses was mainly due to the decline in interest expenses. We raised JPY 49.5 billion of long-term funding in this period. The balance of our debt increased, but thanks to the decline in the cost of funding, our interest expenses were reduced by JPY 126 million.

Next, I will briefly go over our balance sheet on Page 8. The section highlighted in red is the balance sheet as of the end of the first half of 2019. Total assets was JPY 1.044 trillion, up JPY 18.8 billion from the end of the previous period. The main factor was the net increase of JPY 24.4 billion in fixed assets resulting from the property replacements with 3 acquisitions and 2 disposals.

Next is the operating results and outlook on Page 11. I will start with internal growth. Please see the graph on Page 11 showing the occupancy rate and the percentage of floor space of tenants moving in and out. The red line shows the average occupancy rate of the portfolio during the period. The bar graph at the bottom shows the percentage of floor space for which tenants moved in and out during each 6-month period against the entire portfolio.

Please take a look at the bar graph. I will explain the status of tenants moving in and out. We believe the normal level of the percentage of floor space of tenants moving in and out to be around 3%. However, the moving out ratio is now much slower at 1.4%, reflecting the strong office leasing market that is continuing from the previous period. And the move-in ratio is also low at 1.3%. As a result, the average occupancy rate during the period ended up very high at 99.5%, following the previous period.

The second half of 2019 will be quite similar to the first half in that there will be no significant moving ins or outs, although the level is slightly higher than usual due to the impact from the NBF Shinagawa Tower, for which there will be both moving ins and outs. The occupancy rate will remain high at 99.4%.

The first half of 2020, at the far right of the graph, is more than 6 months ahead and we still do not have very good visibility. However, based on historic trends, we have forecasted a moving-out ratio of 1.9%, which is slightly higher than in the first half of 2019. Meanwhile, we have conservatively assumed a 1.7% moving-in ratio because the vacancy rate at the beginning of the period is extremely low. As a result, the average occupancy rate in the first half of 2020 will fall slightly. But even so, occupancy will be extremely high at 99.2% with almost no vacancy in the portfolio.

Next, on Page 12, I will explain the trend in rental revenues. The yellow line represents the period-on-period change in rental revenues from the existing properties only. The bar chart breaks this down into 2 factors. The blue section represents changes in rental revenues from rent revisions with existing tenants. You can see that since turning positive in the second half of 2015, the upward rent revisions have been continuing stably.

And although impacted by individual properties, the extent of the upward revisions has been gradually increasing. We are expecting similar trends in the second half of 2019 and the first half of 2020, and the blue section should stay positive for 10 periods in a row. The green section includes factors other than rent revisions, such as the impact of tenant replacements. Both these factors are leading to continuous and robust internal growth.

Next on Page 13, I will talk about our internal growth initiatives regarding the NBF Shinagawa Tower, which has a significant impact. With regards to NBF Shinagawa Tower, we explained the partial relocation of a major tenant, approximately 6,000 tsubo, and how we plan to lease up the space in the previous results announcement.

With the strong leasing market, we utilized the Mitsui Fudosan Group's planning and sales capabilities. And we have already signed contracts with new tenants for 80% of the subject space. And the remaining space has already been taken, and we have fully completed leasing activities. We have used this opportunity to conduct construction work to convert the building into a multi-tenant building as well as renewal work to improve the competitiveness of the building.

As shown on the left, this tenant replacement which had been planned from before was completed successfully with no downtime. Moreover, we were able to newly sign long-term leases while catching up with market rents. We believe this will contribute in improving and stabilizing future earnings.

In the renewal work, we converted the layout from one suited for a single tenant into one suited for multi-tenants. And by adjusting the layout of the tenant-occupied space and the common areas, we succeeded in expanding the rentable area while improving tenant usability. And by introducing backup power generation that uses medium-pressure gas, we have strengthened BCP capabilities, catering to tenant needs. By adding medium-pressure gas, which is resilient to natural disasters, to the energy sources for emergency power generation, we have been able to extend the duration of emergency power supply from 72 hours, which was already quite long, to an indefinite period as long as the supply of medium-pressure gas lasts. Following the renewal work, backup electricity will be available not only in the common areas, but also in the tenant-occupied space.

Next, I will explain our in -- external growth. As we have been saying from the past, and unfortunately, we will be giving you the same message since there have been no acquisitions since the announcement this February, NBF is focused on long-term comprehensive improvement of our profitability through replacement of properties in the portfolio as well as steady internal growth.

In the first half of 2019, we conducted the following property replacements, as announced in February. We acquired 2 properties, G-BASE TAMACHI and Osaki Bright Core Plaza. We also made additional acquisitions in the Nakanosakaue Sunbright Twin, Nishi-Shinjuku Mitsui Building and Kowa Nishi-Shinbashi Annex B, although the sizes of these additional acquisitions was not that large since these were floors owned by individuals. As of today, cumulative acquisitions in 2019 has reached JPY 33.1 billion.

Meanwhile, we disposed 2 properties: NBF Shibakouen Daimon Street Building and NBF Utsunomiya Building, for a total of JPY 9.2 billion. I will not go into too much detail because we already covered this in the previous results announcement, but through this property replacement, we were able to grow the asset size, improve profitability, improve the situation regarding unrealized losses and make our portfolio younger.

Please turn to Page 15 for the status of our financing as of the end of the first half of 2019. As highlighted in the new funding and repayment section in the upper left, we raised JPY 49.5 billion of long-term funding in this period, including both refinancing and new funding. In order to minimize future uncertainties, we made efforts to secure long-term fixed interest funding with an average duration of 8.7 years while maintaining our focus on diversifying the maturities. The average interest rate for the debt we procured in this period was 0.27% compared to the 1.02% which was the average interest of the debt that matured in this period.

We were able to take advantage of the favorable funding environment and secure low interest rates. As a result, we were able to control the average cost of interest while further extending the average remaining period to maturity to 5.54 years, as shown in the finance data on the upper right. Although the LTV at the end of the period rose slightly to 41.7%, it is still at around the middle of our targeted LTV range of 36% to 46%, and we can still raise around JPY 82 billion if we were to go up to 46% LTV.

The bar chart at the bottom shows the amounts and the interest rates of the upcoming repayments in each year, and the red section highlights the funding we raised in the first half of 2019. Up until the year 2023, we will be repaying debt with an average interest rate of around 0.7% to 1%, which means that if the current interest rate environment persists, we will be able to continue to lower our interest expenses through refinancing for the time being. For details, please take a look at the table outlining the funding track record on Page 16 later. We will continue to communicate closely with our lenders, diversify the debt maturities while further lowering our interest expenses.

Next, on Page 17, I will go over the appraisal value assessment. The tables at the bottom left show the period-on-period changes in cap rates and appraisal value. In this period's appraisals, the cap rates were reviewed for Central Tokyo properties as well as for properties in other areas and were lower for 46 out of the 71 properties. As a result, the appraisal values were raised for 47 properties. Meanwhile, the reductions in appraisal values for 8 properties were all a result of changes in the life cycle cost assumptions in relation to the engineering reports we obtain once every 5 years.

This period's appraisal values were impacted from the cap rates being reviewed and lowered, not only for Central Tokyo properties, but also for regional and suburban properties as well as the unit rent assumptions being reviewed and raised. We expect this upward trend in appraisal values to continue, although gradually, because we expect further improvements in cash flow from increases in rent revenues. As shown in the table at the top, the unrealized gain increased JPY 18.3 billion to become JPY 262.1 billion.

Next, I will go over our forecast on Page 19. The dark red section is the current second half of 2019 and the orange section on the right is the forecast for the first half of 2020. Please see the forecast for the second half of 2019. We are forecasting total operating revenues to be JPY 39.2 billion, up JPY 672 million period-on-period. Our forecasted operating income is JPY 16.8 billion, an increase of JPY 104 million period-on-period. And net income is forecasted to be JPY 15.46 billion, up JPY 72 million period-on-period. There will be no additions to the reserve for advanced depreciation in this period, meaning that the net income will be equal to total distribution. And our forecast DPU is JPY 10,950, up JPY 390 or 3.7% period-on-period.

We have shown breakdowns in the summary of period-on-period change table on the right. Let me add a few brief comments. For rental revenues, we are forecasting JPY 416 million of growth from existing properties for which internal growth through upward rent revisions and tenant replacements is continuing. And together with the JPY 339 million of revenue growth from the full period contribution of properties acquired in the first half of 2019, total revenue growth is expected to be JPY 755 million. For other revenues related to property leasing, the positive items include one-off items, such as seasonal factors such as air conditioning expenses as well as the one-off revenues from the tenant replacements in the NBF Shinagawa Tower continuing.

Meanwhile, we are not factoring in capital gains which we booked JPY 478 million in the first half of 2019. The orange section on the right is the forecast for the first half of 2020, which is 2 periods ahead. We are forecasting operating revenues to be JPY 38.39 billion, which is an JPY 811 million decline. This is due to the decline in incidental income, such as air-conditioning expenses as well as the one-off revenue in relation to the NBF Shinagawa Tower in the first and second halves of 2019 not being repeated. Rental revenues, which is our core revenue, is expected to continue to grow by JPY 251 million, thanks mainly to further upward rent revisions. We are forecasting net income of JPY 15.1 billion and a DPU of JPY 10,700. This sums up the forecast section.

The graphs on Page 20 summarize our forecast. For rental revenues, although we are not factoring in new acquisitions in the current forecast, we are anticipating a steady increase from continuous internal growth. On the upper right, you will also notice the steady growth in the base portion of operating income from property leasing activities when excluding the one-off impact from the NBF Shinagawa Tower, excluding miscellaneous revenues.

I will finish off by talking about our ESG initiatives. Please skip a few pages to Page 38. With the continuous rise in awareness towards ESG, NBF is continuing its ESG initiatives, including our efforts to lower the environmental burden in our portfolio operations as well as being considerate to our stakeholders, including the local community and our employees.

In terms of ESG evaluations and certifications. We started participating in the GRESB certification from 2015 as shown on the upper left. In 2018, we obtained the 5-Star rating, which is the highest among the Green Star certifications. We are also working on obtaining the DBJ Green Building certificates for our properties, as shown on the bottom left. As of today, we have obtained the certificates for 38 properties, all at 3 stars or above, which is roughly 70% of our portfolio in terms of floor space.

In terms of our environmental initiatives, as shown on the upper right, during the second half of 2018 and the first half of 2019, we have been focusing on switching the lighting in both the tenant-occupied and the common spaces in 26 properties to LED. This helps cut down on CO2 emissions by as much as 60% compared to the current lighting while also leading to higher tenant satisfaction and improving the competitiveness of our buildings. And with the recent trends in work style reform, we as an office REIT manager, are also actively working on improving our own office environment as well as introducing telework with the aim of improving our own productivity.

In closing, together with the ups and downs in the equity markets, there are some risk factors in the global economy, such as the U.S.-China trade issue. Here in Japan, there are signs of a slowdown, mainly in the manufacturing industry. However, the economy remains robust overall with drivers such as the telecommunications and services sectors. Companies are doing well and are working to hire employees as well as improve productivity, demand for office space remains strong.

We at NBF acknowledge our responsibility to prepare for future challenges while making the most of the current market environment and sustaining our growth. And we will continue to accelerate our efforts to achieve this goal. This concludes my presentation. Thank you for your attention.